SQUAWK BOX WEEKLY UPDATE – 11/02/15

We’ve now seen five consecutive weeks of gains for the markets, with the S&P 500 gaining another +0.2%, moving up to 2,079 on Friday, October 30 from 2,075 on Friday, October 23.

Interestingly, 4 out of the 5 days last week were actually down days – of course, with one big exception in Wednesday, where we got confirmation that interest rates will remain at zero once again.

We closed out the notoriously tough month of October in great shape, with a broad global rally in equities – Japanese Nikkei up nearly +10%, Germany’s DAX up +12%, and the S&P 500 up +8.3%.

In today’s Monday trading, we kept the momentum going, as we added another 25 points or 1.2% to our benchmark index, putting the S&P 500 towards the upper end of the record territory 100-point range (2,020 – 2,120).

More importantly, we’re now only 27 points away from the all-time record high of 2,131 reached back in May.

While a bulk of this sustained move higher has undoubtedly been short covering, the rally we’ve seen has been very impressive nonetheless – and interestingly has been led by some surprising sectors:

Leading the rally and outperforming over these past five positive weeks: Basic Materials +16%, Energy up +14%, Technology up +13%, Consumer Discretionary up +12%.

The 12 months that preceded this 5-week rally were led by Consumer Discretionary, Consumer Staples, Utilities, and Healthcare.

Since the recent low of 1,868 on August 25, the overall S&P 500 is up nearly 13%, now with Utilities, Consumer Staples, and Financials underperforming. It is certainly interesting that Energy and Materials are leading markets higher as they’ve continued to show the weakest 3Q earnings. Perhaps, on a more concerning front, the smaller-cap Russell 2000 index has really lagged this past month which could be a proxy for slowing U.S. growth, not to mention the fact that it was smaller-cap stocks that outperformed from 2009-2014.

Recent Trading History

Continuing on the technical front, the S&P 500 has been able to push above key former support/current resistance levels of 2,020, most recently surging back above its 200-day moving average.

The S&P 500 had been recently trading in a range-bound (nearly 150-point range) for roughly two months (late August – mid October), trading sideways in volatile fashion between 1,870 and 2,020.

The S&P 500 was previously range-bound (roughly 100-point range) for roughly 5 ½ months (March-mid-August), trading sideways between 2,020 and near record territory of 2,120, before falling convincingly below the 200-day moving average in late August.

Volatility in late August and September soared as the S&P 500 dropped as much as -12% to a recent low of 1,867 (level last seen in October of 2014), however, the VIX (Volatility Index) has collapsed roughly -40% since the end of September as markets have grinded higher.

More than 100 companies in the S&P 500 are scheduled to announce earnings this week, with a bulk of the attention on media giants including Walt Disney, 21st Century Fox, Time Warner, CBS and Discovery Communications.

The biggest event of the week will be the October employment report, scheduled for Friday morning before the open.

FOMC Decision on Interest Rates.

December 16 (with Press Conference)

Many Fed officials will be speaking throughout the week, most notably Fed Chair Janet Yellen, Vice Chair Stanley Fischer, and New York Fed President William Dudley.

Other central banks will be in the headlines this week, as we’ll hear from the Reserve Bank of Australia Tuesday, in which some expect a rate cut, and on Thursday, we’ll hear from the Bank of England where we’ll get a look at their minutes, quarterly rate decision, and inflation report.